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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 11-K
(Mark One)
[x] Annual Report pursuant to Section 15(d) of the Securities Exchange of
1934
For the fiscal year ended December 31, 2003
OR
[ ] Transition Report pursuant to Section 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from ______ to_______
Commission File Number 1-11416
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below:
Consumer Portfolio Services, Inc. 401(k) Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Consumer Portfolio Services, Inc.
16355 Laguna Canyon Road
Irvine, CA 92618
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REQUIRED INFORMATION
I. Financial Statements.
Financial statements and schedule prepared in accordance with the
financial reporting requirements of the Employee Retirement Income Security Act
of 1974, together with the report of independent registered public accounting
firm thereon, are filed herewith.
II. Exhibits:
A Consent of Independent Registered Public Accounting Firm is filed
herewith as Exhibit 23.1.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the Plan) have duly caused this annual
report to be signed on its behalf by the undersigned, hereunto duly authorized.
Consumer Portfolio Services, Inc. 401(k)Plan
Date: June 28, 2004 By: /s/ DORIS F. WARREN
Doris F. Warren
Member, Administrative Committee
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Financial Statements and Supplemental Schedule
December 31, 2003 and 2002
(With Report of Independent Registered Public Accounting Firm Thereon)
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
PAGE
Report of Independent Registered Public Accounting Firm 1
Statements of Net Assets Available for Benefits -
December 31, 2003 and 2002 2
Statements of Changes in Net Assets Available for Benefits -
Years ended December 31, 2003 and 2002 3
Notes to Financial Statements 4
SCHEDULE
Schedule H, Line 4i - Schedule of Assets (Held at End of Year) -
December 31, 2003 10
All schedules omitted are not applicable or are not required based on disclosure
requirements of the Employee Retirement Income Security Act of 1974 and
regulations issued by the Department of Labor.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Administrator
Consumer Portfolio Services, Inc. 401(k) Plan:
We have audited the accompanying statements of net assets available for benefits
of the Consumer Portfolio Services, Inc. 401(k) Plan (the Plan) as of December
31, 2003 and 2002 and the related statements of changes in net assets available
for benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2003 and 2002 and the changes in net assets available for benefits
for the years then ended in conformity with United States generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule, schedule H,
line 4i - schedule of assets (held at end of year) is presented for the purpose
of additional analysis and is not a required part of the basic financial
statements but is supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. This supplemental schedule is the
responsibility of the Plan's management. The supplemental schedule has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, is fairly stated, in all material
respects, in relation to the basic financial statements taken as a whole.
/s/ KPMG LLP
June 28, 2004
1
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Statements of Net Assets Available for Benefits
December 31, 2003 and 2002
2003 2002
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Investments, at fair value:
Money market fund $ -- 32,681
Guaranteed interest account 1,517,379 344,753
Mutual funds 4,961,240 1,903,487
Prudential Financial, Inc. common stock -- 14,473
Consumer Portfolio Services, Inc. common stock 1,337,314 804,440
Participant loans 261,039 171,337
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Total investments 8,076,972 3,271,171
Receivables:
Employee contributions 16,391 18,893
Payables:
Excess contributions refundable (3,672) --
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Net assets available for benefits $ 8,089,691 3,290,064
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See accompanying notes to financial statements.
2
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Statements of Changes in Net Assets Available for Benefits
Years ended December 31, 2003 and 2002
2003 2002
------------ ------------
Additions (reduction) to net assets attributed to:
Interest $ 11,634 26,670
Dividends 3,249 28,202
Net appreciation (depreciation) in fair value of investments 1,933,486 (234,628)
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1,948,369 (179,756)
Investment expenses (57,378) (6,790)
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1,890,991 (186,546)
Contributions:
Employees 803,110 711,577
Employer 297,665 --
Employees' individual rollover 19,821 10,252
Transferred in from a merged Plan (Note 1) 3,293,882 --
------------ ------------
Total additions 6,305,469 535,283
Deductions from net assets attributed to:
Benefits paid to participants 1,505,842 460,406
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Net increase 4,799,627 74,877
Net assets available for benefits:
Beginning of year 3,290,064 3,215,187
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End of year $ 8,089,691 $ 3,290,064
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See accompanying notes to financial statements.
3
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Notes to Financial Statements
December 31, 2003 and 2002
(1) DESCRIPTION OF THE PLAN
The following description of the Consumer Portfolio Services, Inc. (the
Plan Sponsor or CPS) 401(k) Plan (The Plan) provides only general
information. Participants should refer to the Plan agreement for a more
complete description of the Plan's provisions.
(a) GENERAL
The Plan was established as a profit sharing plan with a cash
or deferred arrangement on January 1, 1994. The Plan was
restated as of January 1, 1996 to permit investment in the
Plan Sponsor's common stock without regard to Section 407(a)
of ERISA. Effective January 1, 2003, the Plan Sponsor adopted
the Mass Mutual Life Insurance Company Flexinvest(R) Prototype
Non-Standardized 401(k) Profit Sharing Plan.
The Plan is a defined contribution plan which provides
retirement benefits for eligible employees of the Plan
Sponsor. It is subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA).
(b) ADMINISTRATION OF THE PLAN
The Plan is administered by the Human Resources Department
(the Plan Administrator) of the Plan Sponsor. The Plan
Administrator consults with the board of directors and other
key management of the Plan Sponsor when managing the
operations and the administration of the Plan.
During 2002 and through March 4, 2003, the Plan was managed by
the Prudential Insurance Company of America. As of March 4,
2003, the Plan is operated under an agreement which requires
that Mass Mutual Retirement Saving (Mass Mutual), custodian
and record keeper, holds and distributes the funds of the Plan
in accordance with tht text of the Plan and the instructions
of the Plan Administrator or its designees.
(c) CONTRIBUTIONS
Through December 31, 2002, all employees of the Plan Sponsor,
except for employees covered by a collective bargaining
agreement and nonresident aliens, were eligible to participate
in the Plan after they have completed three months of service.
During 2002, participants could contribute up to 15% of their
compensation. Effective January 1, 2003, employees are
eligible to participate in the Plan after completing 90 days
of service. In accordance with the Plan, participants may
contribute up to 50% of their annual compensation.
Contributions are subject to certain limitations as defined in
the Plan as well as a maximum of $12,000 and $11,000 for the
years ended December 31, 2003 and 2002, respectively under the
Internal Revenue Code of 1986. Participants may roll over into
the Plan amounts representing distributions from other
qualified plans.
The Plan Sponsor may make a discretionary matching
contribution equal to a discretionary percentage of the
participant's pretax contributions. Discretionary matching
contributions were $297,665 and $0 for the years ended
December 31, 2003 and 2002, respectfully.
(d) PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's
contributions, allocations of the Plan Sponsor's matching
contributions and investment earnings and charged with an
allocation of expenses and investment losses. Allocations are
based on participant earnings or account balances, as defined.
(e) VESTING
Participants are immediately vested in their contributions
plus actual earnings thereon. Vesting in the Plan Sponsor's
matching contributions plus actual earnings thereon is based
on years of continuous service. A participant vests at the
rate of 20% after two years of credited service and 20% each
4
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Notes to Financial Statements
December 31, 2003 and 2002
year thereafter until 100% is reached after six years of
credited service. Participants are also fully vested at death,
retirement, and upon termination for disability.
(f) INVESTMENT OPTIONS
The Plan offers various investment options which are managed
by several outside investment managers. Upon enrollment in the
Plan, participants may direct their contributions, in any of
the investment options offered at the time. Participants may
change their investment options daily. Participants should
refer to the Plan fund description pamphlet for a complete
description of the investment options and for the detailed
composition of each investment fund.
(g) PARTICIPANTS LOANS
Participants may borrow from their fund accounts. Loan
transactions are treated as a transfer to (from) the
investment funds. The loans are secured by the balance in the
participant's account and bear interest at a rate commensurate
with local prevailing rates as determined by the Plan
Administrator. Loans are limited to the lesser of $50,000
reduced by the highest outstanding loan balance during the
preceding 12 months or 50% of the participant's vested account
balance. Principal and interest are paid ratably through
payroll deductions.
Participant loans are included in the statements of net assets
available for plan benefits at their outstanding balances,
which approximate fair value of the notes. The notes are
payable through payroll deductions in installments of
principal plus interest at rates of 5.00% - 11.50%, with final
payments due between January 2003 and December 2008, and are
secured by the participants' vested account balances.
(h) PAYMENTS OF BENEFITS
Upon termination of service, a participant may elect to
receive either a single lump sum payment in cash equal to the
value of the vested interest in his or her account, or a
series of substantially equal annual or more frequent
installments over a period not to exceed the participant's
life expectancy. Benefits are recorded when paid.
(i) FORFEITED ACCOUNTS
Through December 31, 2002, forfeitures were applied to reduce
any employer contribution. Effective January 1, 2003,
forfeitures attributable to matching contributions will be
applied first to reduce expenses related to the administration
of the Plan and then toward any employer contributions. As of
December 31, 2003 and 2002 the balance of forfeited accounts
totaled $163,784 and $111,769, respectively.
(j) PLAN TERMINATION
Although they have not expressed any intent to do so, the Plan
Sponsor has the right under the Plan to discontinue
contributions at any time and to terminate the Plan subject to
the provisions of ERISA. In the event of Plan termination,
participants will become 100% vested in their accounts.
5
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Notes to Financial Statements
December 31, 2003 and 2002
(k) PLAN MERGERS
The board of directors approved a merger of the MFN Financial
Corporation Retirement Savings Plan into the Plan. The sponsor
of the MFN Financial Corporation Retirement Saving Plan is MFN
Financial Corporation, a subsidiary of Consumer Portfolio
Services, Inc. Assets of $3,292,882 were transferred into the
Plan on February 12, 2003.
(2) SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF ACCOUNTING
The financial statements of the Plan have been prepared on the
accrual basis of accounting.
(b) INVESTMENTS
Publicly traded securities are carried at fair value based on
the published market quotations. Shares of mutual funds are
valued at the net asset value of shares held by the Plan at
year-end. Participant loans are valued at their outstanding
balances, which approximates fair value. Purchases and sales
of investments are recorded on a trade-date basis. Dividends
are recorded on the ex-dividend date. Interest income is
recorded on the accrual basis.
Realized gains and losses on investments are based on the
market value of the asset at the beginning of the year or at
the time of purchase for assets purchased during the year and
the related fair value on the day the investments are sold
during the year.
(c) ADMINISTRATIVE EXPENSES
The Plan and the plan sponsor share in plan expenses. Certain
direct investment expenses such as loan, withdrawal or
distribution processing fees are deducted from participants'
accounts.
(d) USE OF ESTIMATES
The Plan Administrator has made a number of estimates and
assumptions relating to the reporting of assets and
liabilities to prepare these financial statements in
conformity with accounting principles generally accepted in
the United States of America. Accordingly, actual results may
differ from those estimates.
(e) RISKS AND UNCERTAINTIES
The Plan provides for various investments options in money
market funds, mutual funds, guaranteed interest accounts and
the common stock of Consumer Portfolio Services, Inc.
Investment securities are exposed to various risks such as
interest rate, market, and credit risks. Due to the level of
uncertainty related to changes in value of investment
securities, it is at least reasonably possible that changes in
the various risk factors could materially affect participants'
account balances and the amounts reported in the financial
statements.
(f) CONCENTRATION
Investments in the common stock of Consumer Portfolio
Services, Inc. comprise approximately 17% and 25% of the
Plan's investments as of December 31, 2003 and 2002,
respectively.
6
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Notes to Financial Statements
December 31, 2003 and 2002
(3) INVESTMENTS
The following presents the fair value of investments that represent 5%
or more of the Plan's net assets:
2003 2002
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Investment:
MM Guaranteed Interest Account 1,517,379 --
Main Street (Oppenheimer) 642,986 --
MM Aggressive Growth (Sands Cap) 627,463 --
MM Blue Chip Growth (Fidelity) 453,227 --
MM Fundamental Val (Wellington) 445,127 --
MM Indexed Equity 807,979 --
CPS Stock 1,337,314 804,440
Fidelity Advisor Growth Opportunities Fund -- 366,686
Franklin U.S. Government Securities Fund -- 192,104
MFS Capital Opportunities Fund -- 228,019
MFS Total Return Fund -- 176,282
PIMCO Growth Fund -- 236,312
Prudential Stock Index Fund -- 443,825
Prudential Guaranteed Interest Account -- 344,753
Other investments individually less than 5% 2,245,497 478,750
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$8,076,972 3,271,171
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*Includes both participant and nonparticipant directed investments.
7
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Notes to Financial Statements
December 31, 2003 and 2002
During 2003 and 2002, the Plan's investments (including gains and
losses on investments bought and sold, as well as held during the year)
appreciated (depreciated) in value by investment type, as follows:
2003 2002
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Investment:
Mutual funds $ 1,222,306 (514,702)
Common stocks 711,180 280,074
------------ ------------
$ 1,933,486 (234,628)
============ ============
(4) NONPARTICIPANT-DIRECTED INVESTMENT
Information regarding the net assets and the significant components of
the changes in net assets relating to the nonparticipant-directed
investments is as follows:
2003 2002
----------- -----------
Investment:
CPS common stock $1,337,314 804,440
Prudential Financial, Inc.
common stock -- 14,473
----------- -----------
$1,337,314 818,913
=========== ===========
YEAR ENDED
DECEMBER 31,
2003 2002
----------- -----------
Changes in net assets:
Contributions $ 95,110 106,286
Net appreciation 711,180 280,074
Benefits paid to participants (75,990) (39,792)
Transfers to participant-directed
investments -- (85,381)
----------- -----------
$ 730,300 261,187
=========== ===========
(5) DEMUTUALIZATION OF THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
On December 18, 2001 The Prudential Insurance Company of America
(Prudential Insurance) converted from a mutual life insurance company
owned by its policyholders to a stock life insurance company and became
an indirect, wholly owned subsidiary of Prudential Financial, Inc.
(Prudential Financial). In January 2002, as part of the conversion, the
Plan received 456 shares of Prudential Financial's common stock. The
shares received by the Plan represent the compensation to which the
8
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Notes to Financial Statements
December 31, 2003 and 2002
Plan was entitled under Prudential Insurance's demutualization plan,
which was approved by the state of New Jersey on October 15, 2001. The
fair value of the common stock was recorded as a receivable as of
December 31, 2001 and upon receipt of the common stock in 2002 as an
investment. The common stock is nonparticipant-directed and was
allocated to participant accounts in 2003.
(6) TAX STATUS
The Internal Revenue Service has determined and informed the Plan
Sponsor by a letter dated February 7, 1996 that the Plan and related
trust are designed in accordance with applicable sections of the
Internal Revenue Code (IRC). The Plan has been amended since receiving
the determination letter. However, the Plan Administrator believes that
the Plan is designed and is currently being operated in compliance with
the applicable requirements of the IRC.
(7) SUBSEQUENT EVENT
Effective January 1, 2004, The Finance Company 401(k) Plan, a plan
sponsored by The Finance Company, a subsidiary of Consumer Portfolio
Services, Inc. was merged into the Plan.
9
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Schedule H, Line 4i Schedule of Assets (Held at End of Year)
December 31, 2003
Description of investment,
Identity of issuer, including maturity date,
borrower, lessor, or rate of interest, collateral,
similar party par, or maturity value Cost Current value
------------------------------ ------------------------------------- ---------------- ----------------
* Consumer Portfolio
Services, Inc. + Common stock 384,899 shares $ 792,347 1,337,314
Mass Mutual MM Aggressive Journey, 251 units 25,864
Mass Mutual MM Conservative Journey, 1,563 units 189,275
DLB SmCO Opportunities
(Babson) DLB SmCO Opportunities (Babson), 94 units 22,633
Fidelity Investments Fidelity Dividend Growth Fund, 192 units 1,868
Fidelity Investments Fidelity Fund, 406 units 4,111
Oppenheimer Investments Oppenheimer Global Fund, 1,186 units 176,451
Mass Mutual MM Guaranteed Interest Fund 1,517,379
High Yield (Oppenheimer) Oppenheimer High Yield Fund, 792 units 90,012
Mass Mutual Holding Account Unallocated 3,852
Int'l New Discovery (MFS) International New Discovery (MFS), 814 units 120,873
Janus Investments JCC Balanced (Janus), 3,392 units 330,530
Oppenheimer Investments Oppenheimer Main Street Growth
and Income Growth Fund, 6,917 units 642,986
Mid Cap Core Equity (Aim) Mid Cap Core Equity (Aim), 59 units 7,452
Mass Mutual MM Aggressive Growth (Sands Cap), 12,622 units 627,463
Mass Mutual MM Blue Chip Growth (Fidelity), 5,435 units 453,227
Mass Mutual MM Fundamental Value (Wellington), 4,391 units 445,127
Mass Mutual MM Growth Equity (MFS), 3,732 units 298,468
Mass Mutual Mass Mutual Indexed Equity Fund, 9,713 units 807,979
Mass Mututal MM Inflation-Protected Bond, 305 units 37,437
Mass Mutual MM OTC 100, 2,883 units 107,824
Mass Mutual MM Total Return Bond (PIMCO), 2,886 units 303,271
Mass Mutual MM Moderate Journey, 2,265 units 250,547
Mass Mutual MM Ultra Aggressive Journey, 142 units 13,990
* Participant loans Participant loans: interest rate between
5.00% and 11.50%; maturing between
January 2004 and October 2012 261,039
----------------
$ 8,076,972
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* Denotes a party in interest.
+ Includes both participant and nonparticipant directed investments.
See accompanying independent auditors report.
10